You’re 45-50 With $110K – Can You Create $3K Monthly Income?

Let’s get down and dirty today about what your retirement may or may not look like 15 years from now. If you’re 45-50ish and have access to $110,000 and $250 a month — PLUS a Sominex Account (read: cash reserves) — here’s something you should consider. We’ll compare what you must accomplish in real estate in the next 15 years in order to produce, give or take $3,000 a month in retirement income, to accomplishing the same on Wall Street.

First though, let’s examine what must happen, and work kinda sorta backwards to the startin’ line.

If you were to assume a 7% return on your capital at retirement, what would be needed to generate about $36,000 a year? It’s a simple function of math. But what does that mean in real life terms? What must happen for you to end up with that amount, given 15 years to make it reality? We learn that you must generate an annual return of about 9.75% annually for 15 years to arrive at a personal treasury of $515,000.

Note: Remember, $110,000 lump sum invested on Day 1, and 15 years of adding $250 monthly.

Sounds easy enough, (cough, cough) but there’s a couple problems you’ll hafta overcome if you’re gonna invest in the stock market.

First, name someone you know, even second or third hand who’s made almost double digit annual returns on Wall Street without interruption for 15 years. Go ahead, take yer time, I’ll wait. (Sound of second hand tickin’ away in background.)

Second, your #1 enemy is just one year resulting in a negative return.

At that point your 15 year clock goes into ‘pause’ mode, cuz for the next 1-5 years, you’ll be playin’ catch up just to get back to where you were before the losses. Furthermore, if you insist on holding to your original retirement date you’ll hafta increase your annual returns and/or your monthly investment. More simply put, you’d find yourself having to find a way to make over 10%, year in and year out for the duration. Not freakin’ likely on Wall Street.

Let’s see what needs to be done to obtain the required results using income property.

Gonna work with one hand behind your back this time. No appreciation allowed. Nor are any increases in Net Operating Income allowed. You’ll start AND end the 15 year period with the same NOI.

You’ll take the cash flow from a couple duplexes — you acquired them for about $110,000 — down payment and closing. You’ll apply the cash flow, along with the aforementioned $250 a month to your monthly loan payment — thereby reducing the loan balance. This will result in two free ‘n clear duplexes in about 15 years.

The NOI, still the same ol’ $36,000 it was the day you closed escrow, will now be your annual income. For about a dozen years or so, roughly half of that income will be tax sheltered.

Yeah, I know, not exactly sophisticated stuff, is it? Bet you’ll take the $3,000 a month at retirement though, won’t ya?

“But” you say, “what if in 15 years those duplexes haven’t gone up one dollar in value? Or worse, what if they lost some value?!”

I’ll bring over a hankie and we’ll cry over your tragic loss. We’ll do this as you’re accessing your bank account online, to ensure that month’s $3,000 showed up.

Now, just for kicks ‘n giggles, do you really think that NOI will remain the same for 15 years? Really? Me neither, but we’ll keep the parameters that way, cuz you won’t be upset if the cash flow is more.

Now — are you doin’ it the Wall Street way, or with real estate? Or just not doin’ it?

Call me at 619 889-7100. Let’s figure a way to make your retirement magnificently abundant. Have a good one.

Related posts:

1. Real Estate Investors — Is Your Addiction To Cash Flow Lowering Potential Retirement Income?
2. Real Estate Retirement Fact – Income Shouldn’t Fall
3. Over 50? Smile — You Can Still Generate Retirement Income Through Real Estate
4. San Diego Income Property Owners Will Never Have That Recipe Again
5. Using An EIUL As a Savings Vehicle – Generate Tax Free Income